Malignant melanoma's incidence is increasing by 2.7% annually even as most other cancers are experiencing a decline in incidence. The long-term objective of this project is to commercialize a topical formulation containing retinoic acid (ATRA) for subjects with dysplastic nevi at a higher risk of developing malignant melanoma. However, ATRA is highly irritating to the skin. Several topical delivery systems have been shown to reduce ATRA-induced skin irritation. Phase I studies have shown that the biopolymer chitosan acts as a topical delivery system for ATRA. In this Phase II SBIR study we propose to: (1) standardize the topical formulation containing the ATRA/chitosan delivery system according to our IND 60,073, (2) test the long-term toxicity and irritation of the formulation in both rodents and non-rodents species according to FDA 21 CFR, Part 58, (3) determine whether 6 months of topical ATRA/chitosan will result in a significant clinical improvement of dysplastic nevi, and/or a decrease in the dysplasia grade, and/or a change in the expression of proliferation biomarkers, by performing a multicenter controlled clinical trial involving 16 dysplastic nevi subjects using Internet-based randomization, electronic data capture, coordination and monitoring, and pre and post study clinical and histological assessment.